Difference Between Dividends Ex-Date and Record Date

The key difference between them is that the company’s management announces the record date along with the number of dividends. In contrast, the dividend ex-date depends on the record date and is usually two days before the record date.

To understand these two terms, we must understand what dividends are all about. The dividend is a part of the distribution of profit/earnings in any organization and is paid to its shareholders only. The amount of dividend declaredDividend DeclaredDividend declared is that portion of profits earned that the company’s board of directors decides to pay off as dividends to the shareholders of such company in return to the investment done by the shareholders through the purchase of the company’s securities.read more has to be decided by the management at an annual general meeting of the company. There are four important dates that any investor or shareholder should know before investing in any stock or any company or when holding any dividend-paying stock.

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  • Declaration Date: When the board of directors of the company announces or declares the payment of a dividend, which includes the size of the dividend, record date, or payment date.Ex-Dividend Date: The ex-dividend dateEx-Dividend DateAn ex-dividend date is one of the four important dividend dates, usually set one business day before the record date. It is a deadline; shareholders need to buy the stocks before this date to become eligible for the upcoming dividend payout. It is also called the ex-date.read more is important to keep in mind to get the benefits of dividend benefits. This date is two days before the record date; a shareholder should purchase shares of that particular company on or before the ex-dividend date. In India, the stock settlement is on a T+2 basis, which means if you purchase shares today, you will receive the stock in your bank account after two business days. That is the date when your name as a shareholder is listed in the books of the company.Record Date: The dividend record dateDividend Record DateThe date of record for dividends is the cut-off date decided by the top management for the investors to get registered as a stockholder in the company’s books to get the dividend payment on their security holdings.read more is the date at which the investor has to be in the company’s books as an investor to get the benefits of the Dividend. Post this date, investors will not be eligible for dividend benefits.Payment Date: The payment date is the date at which all eligible investors would get the dividend amount to their accounts.

Dividends Ex-Date vs. Record Date Infographics

Key Differences Between Dividend Ex-Date and Record Date

As we discussed earlier in this article, both dates are quite important when it comes to dividend payments to shareholders, but they have some differences. The main differences between these two dates are as follows:

  • The dividendThe DividendDividends refer to the portion of business earnings paid to the shareholders as gratitude for investing in the company’s equity.read more ex-date depends on the record date two days before the record date. The record date is announced by the company’s management, along with the number of dividends.Dividend ex-date is much more important when buying or selling that particular stock, and it affects the dividend benefits from that stock. The record date is only a date from which the company’s management would get to know the list of the shareholders who will receive the latest announced dividend.On Dividend Ex-date, stock prices get adjusted downwards by the amount of dividend announced. But the stock price on record date won’t be affected by the amount of dividend announced by the management.

Comparative Table

Example

Let’s understand the difference between these two important dates through an example.

Assume there is one company called Company A that declared and announced a dividend on April 20th, 2019, and the record date should be May 5th, 2019, as decided by the company’s management.

In this situation, we can understand all the dates as per the below table,

Conclusion

  • The board of directorsBoard Of DirectorsBoard of Directors (BOD) refers to a corporate body comprising a group of elected people who represent the interest of a company’s stockholders. The board forms the top layer of the hierarchy and focuses on ensuring that the company efficiently achieves its goals.
  • read more announces the record date. On or before, the shareholder must own the share of that particular company to receive the dividend payment. However, buying stock on the record date will not make you eligible for the company’s dividend.The most important date in the dividend situation is to be aware of the ex-dividend date. The company’s management would announce the record date, but the stock exchange would calculate the ex-dividend date as it is affected by weekly or functional holidays as well. If there is no holiday, the ex-dividend date would be two days before the record date. The ex-dividend date is two days before the record day because it takes three days (T+2 settlement days) for a trade to settle in the stock exchange.But the market is affected by several other factors also. On the ex-dividend date, the stock price of that particular stock gets adjusted downwards by the amount of the dividend announced. So sometimes, this downwards in pricing is also not visible on the ex-dividend date.On the Record date and Dividend PayoutDividend PayoutThe dividend payout ratio is the ratio between the total amount of dividends paid (preferred and normal dividend) to the company’s net income. Formula = Dividends/Net Incomeread more dates, the exchange has no price adjustment due to a dividend.These dates are business dates on which the stock exchange works, but not calendar dates.

This article has been a guide to Dividends Ex-Date vs. Record Date. Here we discuss the top differences between dividends ex-date and record date, along with infographics and a comparison table. You may also have a look at the following articles –

  • Examples of DividendsDividends TypesDividend PolicyEx-Dividend Date for Stocks